Optimization of warranty period, price, and allocated reliability

A manufacturer can set three parameters prior to production: reliability in the design, warranty period, and price. These parameters are inter-related so they should be set simultaneously during the design phase of a product. If the product is complex, it may be made of distinct subsystems with drastically different manufacturing and warranty costs. Therefore, the reliability of each subsystem should be allocated to maximize profit. This paper shows the method to choose the allocated reliability of each subsystem, the warranty period of the product, and the sales price of the product in order to maximize the profit. Multiple examples are shown for a product that has three distinct subsystems with various production and warranty costs.